In 200 patients with chronic arthritis subcutaneous nodules were found in 59 (29.5%). Forty-nine of the 58 cases were 50 years of age or older. The nodules when removed often had a definite capsule but in some cases this was poorly defined. When sectioned and examined grossly, multiple areas of necrosis were usually seen, surrounded by fibrous tissue. Necrotic and mucinous material could frequently be expressed from the center. The nodules from 20 cases were examined microscopically. They were found to be made up of multiple inflammatory areas. The centers of these commonly showed varying stages of necrosis. Two types of structure were seen in the necrotic centers, viz., a hyaline eosin-staining material and a fibrillar substance that stained with hematoxylin. Scattered in this necrotic material were varying numbers of polymorphonuclear leucocytes. Surrounding the necrotic centers there were many mononuclear and multinucleated cells (poly-blasts) which varied in size and shape. Many of them resembled the epithelioid cells in a tuberculous lesion. These polyblasts generally but not always had a marked tendency to be arranged in a radial or palisade fashion. In this respect the arrangement was similar to that commonly found in the heart valve in acute rheumatic endocarditis. Polymorphonuclear leucocytes were scattered among the polyblasts, in many cases in small pockets or abscesses. These nodules simulate abscesses more closely than the acute rheumatic nodules which we have studied. These necrotic abscessed areas, since they contain streptococci, would probably tend to bring about a state of hypersensitiveness to streptococci in the patient. The structure of the nodules from chronic arthritis does not differ in any respect except degree from that described in the nodules in subcutaneous tissues, joints, tendons, galea aponeurotica, diaphragm, tongue, tonsils, arteries, heart valves, and auricles and ventricles of the heart in cases of acute rheumatic fever.